It’s almost hard to believe that a word like ‘normal’ is being used in the same sentence as the words ‘housing’ and ‘market.’ Yet that seems to be where the market it headed.
According to data released Tuesday by the National Association of Realtors (NAR), the pace of existing-home sales declined 2.2% in October. In raw numbers, the drop is to a seasonally adjusted annual rate of 4.43 million in October from 4.53 million in September.
“Sales activity is clearly off the bottom and is attempting to settle into normal sustainable levels,” said Lawrence Yun, NAR’s chief economist. Based on current and improving job market conditions as well as attractive affordability conditions, Yun predicts that existing-home sales should steadily improve to healthier levels of more than 5 million by spring of next year.
Also promising were reported inventory level data: the number of existing homes for sale fell 3.4% to 3.86 million.
“Overall, we view these data points as modestly encouraging, as demand continues to stabilize following the expiration of the tax credit, while inventory remains solidly off peak levels,” said Michael Rehaut, an analyst with J.P. Morgan’s North American Equity Research group.
NAR also reported that sales are 25.9% below the 5.98 million-unit level in October 2009 when sales were surging prior to the initial deadline for the first-time buyer tax credit. Comparisons to that period, however, are becoming increasingly irrelevant.
“With the federal home buyers' tax credit adding significant sales volatility earlier in the year, it is difficult to determine what a ‘base’ level of existing home sales activity is,” noted Carl E. Reichardt Jr., a managing director and senior equity research analyst with Wells Fargo Securities in San Francisco.
Foreclosure processing has also added to the market volatility. “The housing market is experiencing an uneven recovery, and a temporary foreclosure stoppage in some states is likely to have held back a number of completed sales,” Yun said.
Looking forward, though, the overall takeaway for builders is news that many would say is long overdue. “In general, this data continues to point to weak but slowly stabilizing conditions in the housing market,” said Reichardt.
Matthew Phair is a freelance writer in New York.